In this unit, we'll explore one of the most important concepts in business valuation: how control affects value.

When you own stock in a public company, you typically own a tiny minority stake. But what if you owned 51% and could control all major decisions?

Engagement Message

Do you think that control would be worth something extra?

Control means having the power to make key business decisions - hiring management, setting strategy, declaring dividends, or even selling the company.

A minority owner can't do any of these things. They're along for the ride, hoping management makes good choices.

Engagement Message

Name one decision a controlling owner can make.

This difference in power creates what we call a "control premium" - the extra value that comes with owning a controlling interest.

Think of it like the difference between being a passenger and being the driver of a car.

Engagement Message

Which position would you rather be in?

Here's a simple example: ABC Company's minority shares trade for $10 each on the stock market.

But if someone wanted to buy 51% of the company to gain control, they might need to pay $12 per share.

Engagement Message

What do you think that $2 difference represents?

That $2 difference is the control premium - it represents the value of having control over the business.

In this case, it's a 20% control premium ($2 ÷ $10 = 20%).

Engagement Message

What percent is a $3 premium on a $15 share?

Control premiums matter because most business valuations involve either controlling or minority interests.

If you're valuing a controlling stake but using minority-based methods, you might undervalue the business by missing this premium.